Instacart’s Service Fee Riles Tipped Workers

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Depending on your point of view, tipping is either a way to link compensation to quality of service — or a way to give workers a lower hourly wage and put the onus of paying their salaries on the customer. But however you feel about tipping, you probably agree that tips should go to workers, not to the company that employs them. The law agrees with you there, doling out stiff penalties to employers who attempt to take a cut of their employees’ tips.

But that’s just tips. Levy a “service charge,” in addition to or in lieu of tips, and there’s almost nothing stopping a company from adding to their bottom line, potentially at the expense of their workers.

That’s what some disgruntled workers allege is happening with grocery delivery startup Instacart. Last year, the company replaced tips with a service fee with the stated goal of making pay more consistent for its workers. Per Instacart: “100% of the variable service amount is used to pay all shoppers more consistently for each and every delivery, not just the last shopper to touch the order.”

“Many workers looked at it another way: Instacart, in their eyes, saw all of the tips they were making and wanted to capture that revenue for itself,” writes Jason Del Rey at Recode. “And when Instacart’s best workers realized the tip-to-service-fee transition would mean lower pay for them, they, in turn, freaked out.”

Instacart added back the tipping feature but made it harder to find in the app, Del Rey says.

How much harder to find? Recode shows the step-by-step process required to get to the tips option. Suffice to say, it is not intuitive. And anyone who’s ever worked in the service industry knows that you don’t get big tips by making it harder for customers to pay you.

More Costs for Customers?

“Instacart’s shopper/delivery people are complaining – to customers,” writes Phil Lempert at Forbes. “On four separate orders, three in Los Angeles and one in Manhattan, my delivery person, a different one each time, explained to me (unprompted) and very politely that the ‘service charge’ I was paying didn’t actually go to them.”

Some have gone ever farther:

It’s worse than bad PR, Lempert says. Although both tips and service fees are optional in Instacart’s app, the bottom line for customers may well be higher costs. How many of us would feel comfortable declining to tip, after being informed that the “service fee” doesn’t go to directly to the deliverer? At a certain point, customers may take their business elsewhere — or at least spend a few seconds looking for those app options that let them opt out of additional charges.

Tell Us What You Think

What’s the best way to compensate workers – tips plus wages, higher hourly pay, or some other method? We want to hear from you. Tell us your thoughts in the comments or join the conversation on Twitter.